Plunging home improvement stocks raise questions about the housing market

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Shares of Whirlpool tanked 11 percent Tuesday, after the home appliance company reported earnings that missed estimates amid a decrease in revenue. The company also cut its guidance, blaming "temporary U.S. demand softness as well as Brexit-related currency volatility and demand weakness in the U.K."

Whirlpool is often considered an auxiliary housing play, as its washing machines, refrigerators and dishwashers are common purchases for those who have just bought a home or are doing a bit of home improvement.

Masco, which sells home improvement-oriented products like kitchen cabinets, paint, shower heads and windows, also turned in an earnings report that missed expectations on Tuesday morning, and saw its stock drop sharply as well.

Yet in contrast to Whirlpool, Masco reported "strong" demand in the U.S., and on the earnings call, the company's CEO said growth in the United Kingdom has been "very good" even following that country's vote to leave the European Union.

For their part, Home Depot shareholders appeared to put more credence in Whirlpool's take; Home Depot slid more than 3 percent Tuesday. And homebuilders like Lennar, KB Home and DR Horton fell as well.

Megan McGrath, research analyst at MKM Partners, told CNBC in an email that the "uncertainty" over the dueling outlooks "is what's pulling down a lot of the housing related names today."

"We went into this quarter somewhat cautiously," McGrath added. "Overall I would say our view hasn't changed meaningfully after WHR and MAS but we are watching for downside risks more carefully and will continue to monitor earnings as we go forward to get a better sense of where the repair/remodel consumer stands."

On the other hand, Robert Wetenhall, who covers housing stocks for RBC Capital Markets, views the Tuesday slip as "a great buying opportunity in the space."

"We're seeing excessive concern given solid fundamentals," he told CNBC in a Tuesday phone interview.

Also contributing to the housing anxiety on Tuesday was paint stalwart Sherwin-Williams, which missed its own earnings estimates Tuesday and cut guidance; the stock tumbled 11 percent.

For Gina Sanchez, CEO of asset manager and allocation consultant Chantico Global, the bad news for these stocks does not reflect a weakening housing market so much as a softening consumer.

"It's more of a retail story, and that's where the issues are. The spending's just not coming in, and we're starting to see disappointments," Sanchez said on CNBC's "Trading Nation."

"The macro backdrop is going to be lackluster, hence the reason why consumer stocks have been lagging," agreed Chad Morganlander, a Stifel Nicolaus portfolio manager, also on the program.

The SPDR S&P Homebuilders ETF (XHB), which contains Whirlpool, Masco and Home Depot in addition to more typical homebuilding stocks, dropped 3.4 percent on Tuesday, and is now down about 7 percent on the year.


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

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